Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 14, 1999

10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on May 14, 1999



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSACTION PERIOD FROM ___________
TO _____________

Commission file number: 0-26038


ResMed Inc.
(Exact name of registrant as specified in its charter)


Delaware 98-0152841
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)



10121 Carroll Canyon Road
San Diego, CA 92131-1109
United States Of America
(Address of principal executive offices)

619 689 2400
(Registrant's telephone number including area code)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __X___ No ______

As of March 31, 1999, there were 14,759,082 shares of Common Stock ($0.004 par
value) outstanding.

RESMED INC. AND SUBSIDIARIES

INDEX





PART I FINANCIAL INFORMATION


Page

Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999 3
(unaudited) and June 30, 1998

Unaudited Condensed Consolidated Statements of Income for 4
the Three Months Ended March 31, 1999 and 1998 and the
Nine Months ended March 31, 1999 and 1998

Unaudited Condensed Consolidated Statements of Cash Flows 5
for the Nine Months Ended March 31, 1999 and 1998

Notes to the Unaudited Condensed Consolidated Financial 6
Statements

Item 2 Management's Discussion and Analysis of Financial Condition 12
and Results of Operations

Item 3 Quantitative and Qualitative Disclosures About Market Risk 16








PART II OTHER INFORMATION


Item 1 Legal Proceedings 17

Item 2 Changes in Securities 17

Item 3 Defaults Upon Senior Securities 17

Item 4 Submission of Matters to a Vote of Security Holders 17

Item 5 Other Information 17

Item 6 Exhibits and Reports on Form 8-K 17

SIGNATURES 18





- -2-


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RESMED INC. AND SUBSIDIARIES




Condensed Consolidated Balance Sheets
(in US$thousands, except per share data)


March 31, June 30,
-------------- -------------
1999 1998
-------------- -------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 10,844 15,526
Marketable securities - available for sale 5,320 5,220
Accounts receivable, net of allowance for doubtful accounts of
337 at March 31, 1999 and $248 at June 30, 1998 15,902 12,789
Government grants receivable 111 384
Inventories (note 3) 10,016 7,647
Deferred income taxes 2,642 2,518
Prepaid expenses and other current assets 2,742 2,520
____________ ____________
Total current assets 47,577 46,604
____________ ____________

Property, plant and equipment, net of accumulated amortization of
8,104 at March 31, 1999 and $5,395 at June 30, 1998 26,619 11,111
Patents, net of accumulated amortization of $489 at March 31, 1999
and $368 at June 30, 1998 514 459
Goodwill, net of accumulated amortization of $1,342 at March 31,
1999 and $893 at June 30, 1998 5,929 5,445
Other assets 2,403 999
____________ ____________
Total assets $ 83,042 64,618
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 5,457 3,759
Accrued expenses 7,711 6,637
Income taxes payable 5,188 3,222
Current portion of long term debt 116 227
____________ ____________
Total current liabilities 18,472 13,845
____________ ____________
Total liabilities 18,472 13,845
____________ ____________
Stockholders' equity:
Preferred stock, $0.01 par value,
2,000,000 shares authorized; none issued - -
Series A Junior Participating preferred stock, $0.01 par value,
150,000 shares authorized; none issued - -
Common Stock, $0.004 par value, 50,000,000 shares
authorized; issued and outstanding 14,759,082 at March 31,
1999 and 14,552,000 at June 30, 1998 59 58
Additional paid-in capital 32,936 31,224
Retained earnings 38,644 27,179
Accumulated other comprehensive income (note 4) (7,069) (7,688)
____________ ____________
Total stockholders' equity 64,570 50,773
____________ ____________
Commitments and contingencies (note 5) - -

Total liabilities and stockholders' equity $ 83,042 64,618
============ ============


See accompanying notes to condensed consolidated financial statements.



- -3-
RESMED INC. AND SUBSIDIARIES




Unaudited Condensed Consolidated Statements of Income
(in US$thousands, except per share data)

Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- ------------------


1999 1998 1999 1998
-------------------- ------------------ -------------- --------------

Net revenue $ 22,760 17,113 63,484 47,237
Cost of sales 7,901 6,098 20,949 16,697
____________ ____________ ____________ ____________
Gross profit 14,859 11,015 42,535 30,540
____________ ____________ ____________ ____________

Operating expenses
Selling, general and administrative expenses 6,636 5,300 19,889 14,994
Research and development expenses 1,512 1,290 4,581 3,789
____________ ____________ ____________ ____________
Total operating expenses 8,148 6,590 24,470 18,783
____________ ____________ ____________ ____________
Income from operations 6,711 4,425 18,065 11,757
____________ ____________ ____________ ____________

Other income (expenses), net:
Interest income, net 152 201 555 755
Government grants 138 128 402 476
Other income (expenses), net (353) 47 (1,567) (1,394)
____________ ____________ ____________ ____________
Total other income (expenses), net (63) 376 (610) (163)
____________ ____________ ____________ ____________

Income before income taxes 6,648 4,801 17,455 11,594
Income taxes 2,280 1,655 5,990 4,000
____________ ____________ ____________ ____________
Net income $ 4,368 3,146 11,465 7,594
============ ============ ============ ============

Basic earnings per share $ 0.30 $ 0.22 $ 0.78 $ 0.52
Diluted earnings per share $ 0.28 $ 0.21 $ 0.74 $ 0.51


See accompanying notes to condensed consolidated financial statements.



- -4-
RESMED INC. AND SUBSIDIARIES




Unaudited Condensed Consolidated Statements of Cash Flows
(in US$thousands)
Nine Months Ended
March 31,
-------------------



1999 1998
------------------- -------------

Cash flows from operating activities:
Net income $ 11,465 7,594

Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,328 2,831
Provision for service warranties 214 80
Foreign currency options revaluations 115 1,669
Changes in operating assets and liabilities:
Accounts receivable, net (3,384) (3,271)
Government grants 286 (41)
Inventories (2,371) (1,744)
Prepaid expenses and other current assets (283) (547)
Accounts payable, accrued expenses and other liabilities 4,916 (3,572)
____________ ____________
Net cash provided by operating activities 14,286 2,999
____________ ____________
Cash flows from investing activities:
Purchases of property, plant and equipment (17,899) (8,319)
Patents costs (151) (261)
Purchase of investments (1,529) (389)
Deferred payments - business acquisitions (1,033) (1,699)
Purchases of marketable securities - available for sale (11,809) (24,879)
Proceeds from sale of marketable securities - available for sale 11,687 35,638
____________ ____________
Net cash provided by/(used in) investing activities (20,734) 91
____________ ____________
Cash flows from financing activities:
Proceeds from issuance of common stock 1,713 781
Repayment of long term debt (114) (124)
____________ ____________
Net cash provided by financing activities 1,599 657
____________ ____________
Effect of exchange rate changes on cash 167 (981)
____________ ____________
Net (decrease)/increase in cash and cash equivalents (4,682) 2,766
____________ ____________
Cash and cash equivalents at beginning of period 15,526 9,077
____________ ____________
Cash and cash equivalents at end of period $ 10,844 11,843
============ ============
Supplemental disclosure of cash flow information:
Income taxes paid $ 4,029 5,528
Interest paid - -


See accompanying notes to condensed consolidated financial statements.


- -5-


RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization and Basis of Presentation

ResMed Inc. (the Company) is a Delaware corporation formed in March 1994
as a holding company for ResMed Group. The Company designs, manufactures and
markets devices for the evaluation and treatment of sleep disordered
breathing, primarily obstructive sleep apnea. The Company's principal
manufacturing operations are located in Australia. Other principal
distribution and sales sites are located in the United States, the United
Kingdom and Europe.

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 1999 and the nine months ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending June 30, 1999.

(2) Summary of Significant Accounting Policies

(a) Basis of Consolidation:

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions
and balances have been eliminated on consolidation.

(b) Revenue Recognition:

Revenue on product sales is recorded at the time of shipment. Royalty
revenue from license agreements is recorded when earned. Service revenue
received in advance from service contracts is initially deferred and
recognized as revenue over the life of the service contract. Revenue from
sale of marketing and distribution rights is initially deferred and
recognized as revenue over the terms of the agreements.

(c) Cash and Cash Equivalents:

Cash equivalents include certificates of deposit, commercial paper, and
other highly liquid investments stated at cost, which approximates market.
Investments with original maturities of 90 days or less are considered to be
cash equivalents for purposes of the consolidated statements of cash flows.

(d) Inventories:

Inventories are stated at the lower of cost, determined principally by
the first- in first- out method, or net realizable value.

- -6-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies, Continued

(e) Property, Plant and Equipment:

Property, plant and equipment is recorded at cost. Depreciation expense
is computed using the straight- line method over the estimated useful lives
of the assets, generally two to ten years. Assets held under capital leases
are recorded at the lower of the net present value of the minimum lease
payments or the fair value of the leased asset at the inception of the lease.
Amortization expense is computed using the straight- line method over the
shorter of the estimated useful lives of the assets or the period of the
related lease. Straight- line and accelerated methods of depreciation are
used for tax purposes. Maintenance and repairs are charged to expense as
incurred.

(f) Patents:

The registration costs for new patents are capitalized and amortized over
the estimated useful life of the patent, generally five years. In the event
of a patent being superseded, the unamortized costs are written off
immediately.

(g) Goodwill

Goodwill arising from business acquisitions is amortized on a
straight-line basis over periods ranging from three to 15 years. The Company
carries goodwill at cost net of amortization. The Company reviews its
goodwill carrying value when events indicate that an impairment may have
occurred in goodwill. If, based on the undiscounted cash flows, management
determines goodwill is not recoverable, goodwill is written down to its
discounted cash flow value and the amortization period is reassessed.

(h) Government Grants:

Government grants revenue is recognized when earned. Grants have been
obtained by the Company from the Australian Federal Government to support
continued development and export of the Company's proprietary positive airway
pressure technology and to assist development of export markets. Grants of
$138,000 and $128,000 have been recognized for the three month period ended
March 31, 1999 and 1998, respectively, and $402,000 and $476,000 for the nine
month periods ended March 31, 1999 and 1998, respectively.

(i) Foreign Currency:

The consolidated financial statements of the Company's non- U.S.
subsidiaries are translated into U.S. dollars for financial reporting
purposes. Assets and liabilities of non- U.S. subsidiaries whose functional
currencies are other than the U.S. dollar are translated at period end
exchange rates, and revenue and expense transactions are translated at
average exchange rates for the period. Cumulative translation adjustments are
recognized as part of "Comprehensive Income", as described in Note 4, and are
included in "Accumulated Other Comprehensive Income" on the Condensed
Consolidated Balance Sheet until such time as the subsidiary is sold or
substantially or completely liquidated. Gains and losses on transactions,
denominated in other than the functional currency of the entity, are
reflected in operations.

- -7-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies, Continued

(j) Research and Development:

All research and development costs are expensed in the period incurred.

(k) Earnings Per Share:

The weighted average shares used to calculate basic earnings per share
was 14,746,000 and 14,516,000 for the quarters ended March 31, 1999 and 1998,
respectively, and 14,699,000 and 14,490,000 for the nine month periods ended
March 31, 1999 and 1998, respectively. The difference between basic earnings
per share and diluted earnings per share is attributable to the impact of
outstanding stock options during the periods presented. Stock options had
the effect of increasing the number of shares used in the calculation (by
application of the treasury stock method) by 984,000 and 586,000 for the
quarters ended March 31, 1999 and 1998, respectively, and by 747,000 and
472,000 for the nine month periods ended March 31, 1999 and 1998,
respectively.

(l) Financial Instruments:

The carrying value of financial instruments, such as cash and cash
equivalents, marketable securities - available for sale, accounts receivable,
government grants, foreign currency option contracts, accounts payable and
long- term debt, approximate their fair value. The Company does not hold or
issue financial instruments for trading purposes.

The fair value of financial instruments is defined as the amount for
which the instrument could be exchanged in a current transaction between
willing parties.

(m) Foreign Exchange Risk Management:

The Company enters into various types of foreign exchange contracts in
managing its foreign exchange risk, including derivative financial
instruments encompassing forward exchange contracts and foreign currency
options.

The purpose of the Company's foreign currency hedging activities is to
protect the Company from adverse exchange rate fluctuations with respect to
net cash movements resulting from the sales of products to foreign customers
and Australian manufacturing activities. The Company enters into foreign
currency option contracts to hedge anticipated sales and manufacturing costs
denominated in principally Australian Dollars, Pound Sterling and
Deutschmarks. The terms of such foreign exchange contracts generally do not
exceed two years.

Premiums to enter certain foreign currency options are included in other
assets and are amortized over the period of the agreement in the consolidated
statement of income against other income, net. At March 31, 1999 and June
30, 1998 unamortized premiums amounted to $702,000 and $267,000,
respectively.

- -8-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies, Continued

(m) Foreign Exchange Risk Management, Continued:

Unrealized gains or losses are recognized as incurred in the accompanying
balance sheets as either other assets or other liabilities and are recorded
within other income, net on the Company's consolidated statements of income.
Unrealized gains and losses on currency derivatives are determined based on
dealer quoted prices.

The Company is exposed to credit related losses in the event of
nonperformance by counterparties to financial instruments, but it does not
expect any counterparties to fail to meet their obligations given their high
credit ratings. The credit exposure of foreign exchange options is
represented by the positive fair value of options at the reporting date.

The Company held foreign currency option contracts with notional amounts
totaling $72,873,000 and $62,683,000 at March 31, 1999 and June 30, 1998,
respectively, to hedge foreign currency items. These contracts mature at
various dates prior to March 31, 2001.

(n) Income Taxes:

The Company accounts for income taxes under the asset and liability
method of accounting for income taxes. Under this method deferred tax assets
and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

(o) Warranty:

Estimated future warranty costs related to certain products are accrued
to operations in the period in which the related revenue is recognized.

(p) Impairment of Long-Lived Assets:

The Company periodically evaluates the carrying value of long-lived
assets to be held and used, including certain identifiable intangible assets,
when events and circumstances indicate that the carrying amount of an asset
may not be recovered. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net
undiscounted cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.

- -9-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies, Continued

(q) As of July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise
and Related Information." This Statement addresses presentation and
disclosure matters and will have no impact on the Company's financial
position or results of operations. As required by Statement 131,
compliance with the respective reporting disclosures will be reflected in
the Company's 1999 Annual Report on Form 10-K.

(3) Inventories




Inventories were comprised of the following at March 31, 1999 and June 30, 1998:


March 31, June 30,
1999 1998
----------- ---------
$'000 '000

Raw materials $ 3,663 2,169
Work in progress 704 546
Finished goods 5,649 4,932
_______ _______
$ 10,016 7,647
======= =======



(4) Comprehensive Income

As of July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", which established
standards for the reporting and display of comprehensive income and its
components in the financial statements. The only component of comprehensive
income that impacts the Company is foreign currency translation adjustments.
The net gain associated with the foreign currency translation adjustments for
the three months ended March 31, 1999 was $147,000 compared to a net gain of
$214,000 for the three months ended March 31, 1998. The net gain associated
with the foreign currency translation adjustments for the nine months ended
March 31, 1999 was $619,000 compared to a net loss of $4.0 million for the
nine months ended March 31, 1998. The Company does not provide for US income
taxes on foreign currency translation adjustments since it does not provide
for such taxes on undistributed earnings of foreign subsidiaries.
Accumulated other comprehensive income at March 31, 1999 and June 30, 1998
consisted solely of foreign currency translation adjustments with debit
balances of $7.1 million and $7.7 million, respectively.

(5) Commitments and Contingencies

The company is currently engaged in litigation relating to the enforcement and
defense of certain of its patents. In 1992, the Australian distributor for
Respironics, Inc. challenged the Company's original Australian patent covering
both a method of and device for treating OSA with CPAP. In May 1994, an
Australian appeals court, relying on issues specific to Australian patent law,
revoked the patent. The Company's market share in Australia has decreased
from 1995 to the present.

- -10-
RESMED INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(5) Commitments and Contingencies, Continued

In May 1995, the Company filed a complaint in the United States District Court
seeking monetary damages from and injunctive relief against Respironics for
alleged infringement of three ResMed patents. In June 1996, the Company filed
an additional complaint against Respironics for infringement of a fourth
ResMed patent, and the actions were consolidated. As of this date,
Respironics has brought three partial summary judgment motions for
non-infringement of the ResMed patents; the Court has granted two of the
motions, and the third is currently being litigated. It is ResMed's intention
to appeal the summary judgment rulings after a final judgment in the
consolidated litigation has been entered in the District Court proceedings.

In May 1995, Respironics and its Australian distributor filed a Statement of
Claim against the Company and Dr. Farrell, in the Federal Court of Australia,
alleging that the Company engaged in unfair trade practices. The Statement of
Claim asserts damage claims for lost profits on sales in the aggregate amount
of approximately $1,000,000. While the Company intends to defend this action,
there can be no assurance that the Company will be successful or that the
Company will not be required to make significant payments to the claimants.
Furthermore, the Company expects to incur ongoing legal costs in defending
this action, as well as in the continuing litigation of its patent cases.

- -11-


RESMED INC. AND SUBSIDIARIES
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Net Revenue

Net revenue increased for the three months ended March 31, 1999 to $22.8
million from $17.1 million for the three months ended March 31, 1998, an
increase of $5.7 million or 33%. For the nine month period ended March 31,
1999 net revenue increased to $63.5 million from $47.2 million in the nine
month period ended March 31, 1998 an increase of $16.3 million or 34%. Both
the three month and nine month increases in net revenue were attributable to
an increase in unit sales of the Company's flow generators and accessories in
North and Latin America and to a lesser extent Europe. In fiscal 1999 net
revenue in North and Latin America increased to $12.4 million from $8.4
million for the quarter, and to $36.5 million from $23.5 million for the nine
month periods ended March 31. In Europe net revenue increased to $8.4 million
from $6.3 million for the quarter, and to $21.9 million from $17.2 million for
the nine month periods ended March 31, 1999 and 1998, respectively.

Gross Profit

Gross profit increased for the three months ended March 31, 1999 to $14.9
million from $11.0 million for the three months ended March 31, 1998, an
increase of $3.9 million or 35%. Gross profit as a percentage of net revenue
increased for the quarter ended March 31, 1999 to 65% from 64% for the three
months ended March 31, 1998. These increases resulted primarily from
increased unit sales of higher margin products and improved manufacturing
efficiencies.

For the nine month period ended March 31, 1999 gross profit increased to $42.5
million from $30.5 million in the same period of fiscal 1998 an increase of
$12.0 million or 39%. Gross profit as a percentage of net revenue increased
for the nine month period ended March 31, 1999 to 67% from 65% achieved for
the nine months ended March 31, 1998. These increases also resulted from
increased unit sales of higher margin products and improved manufacturing
efficiencies.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the three months
ended March 31, 1999 to $6.6 million from $5.3 million for the three months
ended March 31, 1998, an increase of $1.3 million or 25%. This increase was
primarily due to an increase from 136 to 197 in the number of sales and
administrative personnel. As a percentage of net revenue, selling, general
and administrative expenses declined to 29% for the three months ended March
31, 1999 from 31% for the three months ended March 31, 1998. This decrease
was a result of increased economies of scale as a result of higher revenues
over the period.

Selling, general and administrative expenses for the nine months ended March
31, 1999 increased to $19.9 million from $15.0 million for the nine months
ended March 31, 1998, an increase of $4.9 million or 33%. As a percentage of
net revenue, selling, general and administration expenses declined to 31% for
the nine months ended March 31, 1999 from 32% for the nine months ended March
31, 1998.

- -12-
RESMED INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Research and Development Expenses

Research and development expenses increased for the three months ended March
31, 1999 to $1.5 million from $1.3 for the three months ended March 31, 1998,
an increase of $222,000 or 17%. The increase reflects increased expenditure
associated with new products currently under development. As a percentage of
net revenue, research and development expenses for the three months ended
March 31, 1999 declined to 7% from 8% for the three months ended March 31,
1998.

For the nine months ended March 31, 1999 research and development expenses
increased to $4.6 million from $3.8 million for the corresponding period in
fiscal 1998, an increase of $792,000 or 21%. The increase was due to
additional costs relating to development and evaluation of new products. As a
percentage of net revenue, research and development expenses for the nine
months ended March 31, 1999 declined to 7% from 8% for the nine months ended
March 31, 1998.

Other Income (Expenses), Net

Other income (expenses), net declined for the three months ended March 31,
1999 to a loss $63,000 from income of $376,000 for the three months ended
March 31, 1998, a decrease of $439,000. The decline in other income
(expenses), net reflects the receipt of $1.25 million in March 1998 in
relation to the granting of licenses to three of the Company's Patents to
Invacare Corporation. Excluding this one time receipt, net losses improved
from a loss of $874,000 for the three months ended March 31, 1998 to a loss of
$63,000 for the three months ended March 31, 1999. The improvement was
attributable to reduced foreign currency losses associated with the Company's
foreign exchange hedging program.

Other income (expenses), net declined for the nine months ended March 31, 1999
to a loss of $610,000, from a loss of $163,000 for the nine months ended March
31, 1998. The decline in other income (expense), net primarily reflects the
one time receipt of licensing fees from Invacare in March 1998 partially
offset by reduced foreign currency losses associated with the Company's
foreign exchange hedging program.

Income Taxes

The Company's effective income tax rate for the three months ended March 31,
1999 marginally declined to 34.3% of income from 34.5% for the three months
ended March 31, 1998 and to 34.3% from 34.5% for the nine months ended March
31, 1999.

- -13-
RESMED INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Liquidity and Capital Resources

As of March 31, 1999 and June 30, 1998, the Company had cash and cash
equivalents and marketable securities available for sale of approximately
$16.2 million and $20.7 million, respectively. The Company's working capital
approximated $29.1 million and $32.8 million, at March 31, 1999 and June 30,
1998, respectively. The decline in working capital balances reflects the
construction of a new Australian manufacturing facility partially offset by
cash generated from operations.

During the nine months ended March 31, 1999, the Company's operations
generated $14.3 million of cash from operations, primarily as a result of
increased profit from operations. During the nine months ended March 31, 1998
approximately $3.0 million of cash was generated by operations.

The Company's capital expenditures for the nine month period ended March 31,
1999 and 1998 aggregated $17.9 million and $8.3 million, respectively. The
majority of the expenditures in the nine month period ending March 31, 1999
relates to the construction of the Australian manufacturing facility and to a
lesser extent purchases of computer software and hardware, production tooling
and equipment, office furniture and research and development equipment. As a
result of these capital expenditures, the Company's March 31, 1999 balance
sheet reflects net property, plant and equipment of approximately $26.6
million, compared to $11.1 million at June 30, 1998.

During the nine month period ended March 31, 1999 the Company paid $1.0
million in business acquisition payments in relation to the 1996 acquisition
of Priess. In addition, during the nine month period ended March 31, 1999 the
Company paid $1.0 million to purchase a minority holding in Flaga Hf, the
Iceland based manufacturer of the Embla range of sleep diagnostic equipment.

The company anticipates to expend approximately $2.0 million in relation to
the construction of its new manufacturing facility and computer systems over
the next three months. These payments are to be funded through cash flows from
operations and existing cash resources.

The results of the Company's international operations are affected by changes
in exchange rates between currencies. Changes in exchange rates may
negatively affect the Company's consolidated net revenue and gross profit
margins from international operations. The Company has a substantial exposure
to fluctuations in the Australian dollar with respect to its manufacturing and
research activities which is managed through foreign currency option
contracts.

In May 1993, the Australian Federal Government agreed to lend the Company up
to $870,000 over a six year term. Such a loan bears no interest for the first
three years but bears interest at a rate of 3.8% thereafter until maturity.
The outstanding principal balance of such loan was $116,000 and $227,000 at
March 31, 1999 and June 30, 1998, respectively.

Year 2000

The Company conducted a strategic review of its information systems in fiscal
1997 with a view to upgrading operations to facilitate the growth in business
activity. As a consequence of these review procedures a decision was made to
replace existing internal systems with the Oracle Applications Enterprise
package. The decision to replace the Company's existing information systems
was driven by operational requirements although as a consequence all
information systems are expected to be fully Year 2000 compliant.

- -14-
RESMED INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS

Year 2000, Continued

While management expects the costs associated with Year 2000 compliance to be
approximately $100,000, the cost of implementing the Oracle Application
Enterprise package is estimated to be approximately $2,000,000. The Company
expects to complete the upgrading of its internal systems to Year 2000
compliance by September 30, 1999

The Company has reviewed its product lines for Year 2000 compliance and, as a
result of this review, believes there is no significant Year 2000 exposure
with regards to the Company's products.

In addition to risks associated with the Company's internal computer system,
the Company is potentially vulnerable to the failure of third parties to
adequately address their Year 2000 issues. ResMed continues to assess the
readiness of key third parties by monitoring such parties' readiness
statements. ResMed is in the process of obtaining assurances from its major
suppliers that they are addressing this issue and that products purchased by
ResMed will function properly in the Year 2000. However, there is no
assurance that the systems of third parties on which the Company relies will
be Year 2000 ready, or that any system failure by such parties would not have
a material adverse effect on the Company.

Beyond the above review procedures, the Company is in the process of, and has
developed, a number of Year 2000 contingency plans should a Year 2000
compliance issue arise. However, there can be no assurance that customers,
suppliers and service providers on which the Company relies will resolve their
Year 2000 issues accurately, thoroughly and on schedule. Failure to complete
the Year 2000 project by Year 2000 could have a material adverse effect on
future operating results or financial condition.

Recent Accounting Developments

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
(SFAS 133), was issued by the Financial Accounting Standards Board in June
1998 and is effective for the Company's quarter ending September 30, 1999.
SFAS 133 standardizes the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts. Under the
standard, entities are required to carry all derivative instruments in the
statement of financial position at fair value. The accounting for changes in
the fair value (ie, gains or losses) of a derivative instrument depends on
whether it has been designated and qualifies as part of a hedging relationship
and, if so, on the reason for holding it. If certain conditions are met,
entities may elect to designate a derivative instrument as a hedge of
exposures to changes in fair values, cash flows, or foreign currencies. If
the hedged exposure is a fair value exposure, the gain or loss on the
derivative instrument is recognized in earnings in the period of change
together with the offsetting loss or gain on the hedged item attributable to
the risk being hedged. If the hedged exposure is a cash flow exposure, the
effective portion of the gain or loss on the derivative instrument is reported
initially as a component of other comprehensive income (outside earnings) and
subsequently reclassified into earnings when the forecasted transaction
affects earnings. Any amounts excluded from the assessment of hedge
effectiveness as well as the ineffective portion of the gain or loss is
reported in earnings immediately. Accounting for foreign currency hedges is
similar to the accounting for fair value and cash flow hedges. If the
derivative instrument is not designated as a hedge, the gain or loss is
recognized in earnings in the period of change.

The company has not determined the impact that Statement 133 will have on its
financial statements and believes that such determination will not be
meaningful until closer to the date of initial adoption.

- -15-

RESMED INC. AND SUBSIDIARIES
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Market Risk

The Company's functional currency is the US dollar although the Company
transacts business in various foreign currencies including a number of major
European currencies as well as the Australian dollar. The Company has
significant foreign currency exposure through both its Australian
manufacturing activities and international sales operations.

The Company has established a foreign currency hedging program using foreign
currency forward exchange contracts and purchased currency call options to
hedge foreign-currency-denominated financial assets, liabilities and
manufacturing expenditure. The goal of this hedging program is to
economically guarantee or lock in the exchange rates on the Company's foreign
currency exposures denominated in the Deutschmark and Australian dollar.
Under this program, increases or decreases in the Company's
foreign-currency-denominated financial assets, liabilities, and firm
commitments are partially offset by gains and losses on the hedging
instruments.

The table below provides information about the Company's foreign currency
derivative financial instruments, by functional currency and presents such
information in US dollar equivalents. The table summarizes information on
instruments and transactions that are sensitive to foreign currency exchange
rates, including foreign currency call options held at March 31, 1999. The
table presents the notional amounts and weighted average exchange rates by
expected (contractual) maturity dates for the Company's foreign currency
derivative financial instruments. These notional amounts generally are used
to calculate payments to be exchanged under the contract or options.









1999 2000 2001 Total
------------------- ------------------- ------------------- -------------------
FOREIGN CURRENCY DERIVATIVES

FOREIGN EXCHANGE CALL OPTIONS

(Receive AUS$/Pay US$)
Option amount $ 9,750,000 $ 49,500,000 $ 9,000,000 $ 68,250,000
Average contractual exchange rate AUS $1 = USD 0.677 AUS $1 = USD 0.677 AUS $1 = USD 0.680 AUS $1 = USD 0.677


(Receive AUS$/Pay DM)
Option amount $ 660,000 $ 2,642,000 $ 1,321,000 $ 4,623,000
Average contractual exchange rate AUS $1 = DM 1.12 AUS $1 = DM 1.12 AUS $1 = DM 1.12 AUS $1 = DM 1.12




Fair Value
Assets/
--------------
(Liabilities)
--------------
FOREIGN CURRENCY DERIVATIVES

FOREIGN EXCHANGE CALL OPTIONS

(Receive AUS$/Pay US$)
Option amount $ 1,040,000
Average contractual exchange rate


(Receive AUS$/Pay DM)
Option amount $ 313,000
Average contractual exchange rate



- -16-

RESMED INC. AND SUBSIDIARIES

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Refer Note 5 to Condensed Consolidated Financial Statements

Item 2. Changes in Securities

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits and Report on Form 8K

Exhibits

The following exhibits are filed as part of this report

Exhibit 27.1 Financial Data Schedule

Report on Form 8-K

None

- -17-

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



ResMed Inc.






/S/ PETER C FARRELL
Peter C Farrell
President and Chief Executive Officer





/S/ ADRIAN M SMITH
Adrian M Smith
Vice President Finance and Chief Financial Officer


- -18-

Exhibit 27.1

ARTICLE. 5 FDS FOR 3RD QUARTER 10-Q



This schedule contains summary financial information extracted from ResMed
Inc's third quarter March 31, 1999 financial report and is qualified in its
entirety by reference to such financial statements.


CURRENCY USD $CURRENCY


PERIOD-TYPE 9-MOS 9-MOS
FISCAL-YEAR-END JUN-30-1999 JUN-30-1998
PERIOD-END MAR-31-1999 MAR-31-1998
EXCHANGE-RATE 1 1
CASH 10,844,000 11,843,000
SECURITIES 5,320,000 7,973,000
RECEIVABLES 15,902,000 11,033,000
ALLOWANCES 337,000 211,000
INVENTORY 10,016,000 7,170,000
CURRENT-ASSETS 47,577,000 41,193,000
PP&E 26,619,000 10,598,000
DEPRECIATION 0 0
TOTAL-ASSETS 83,042,000 58,761,000
CURRENT-LIABILITIES 18,472,000 9,543,000
BONDS 0 0
PREFERRED-MANDATORY 0 0
PREFERRED 0 0
COMMON 59,000 58,000
OTHER-SE 32,936,000 30,408,000
TOTAL-LIABILITY-AND-EQUITY 83,042,000 58,761,000
SALES 63,484,000 47,237,000
TOTAL-REVENUES 63,484,000 47,237,000
CGS 20,949,000 16,697,000
TOTAL-COSTS 0 0
OTHER-EXPENSES 0 0
LOSS-PROVISION 0 0
INTEREST-EXPENSE 0 0
INCOME-PRETAX 17,455,000 11,594,000
INCOME-TAX 5,990,000 4,000,000
INCOME-CONTINUING 11,465,000 7,594,000
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET-INCOME 11,465,000 7,594,000
EPS-BASIC $ 0.78 $ 0.52
EPS-DILUTED $ 0.74 $ 0.51